Turning Gender Equality into Reality: from the Treaty of Rome to the Quota Debate

Conference at the European Parliament: Gender Equality – what do the Parliaments of the European Union do – an exchange of best practices/Brussels

3 October 2012

Honourable Members, ladies and gentlemen,

I am delighted to speak to you, Members of European Parliament and Members of National Parliaments, today about gender equality in the European Union.

Let me get straight to the point and mention my most recent project in this area, which has already attracted a lot of attention amongst Parliamentarians, Member States, the business world, media and public opinion: a possible EU legalinstrument on balanced representation of women and men on corporate boards.

This proposal is not coming out of the blue: The EU's competence to legislate on gender equality has a long tradition. The Treaty of Rome in 1957 already included a provision banning discrimination on grounds of sex. It is very interesting to note that the background to this provision was mainly economic: the Member States, in particular France, wanted to eliminate possible distortions in competition between undertakings established in different Member States. France had adopted provisions on equal pay for men and women much earlier and it feared that cheap female labour in other Member States (notably Germany) would put French undertakings and the economy at a disadvantage. In 1976, the European Court of Justice ruled that the then Article 119 EEC not only had an economic, but also a social aim. As such, it contributed to social progress and the improvement of living and working conditions. Economic and social objectives are therefore the two sides of the same coin.

Here is a concrete example: Four decades have passed since the European Court of Justice rendered (in May 1971) its first judgment in a series of cases brought by Gabrielle Defrenne against her employer SABENA. Ms. Defrenne, a flight attendant, complained about unequal pay for identical work performed by male and female crew-members. The Court judgments clarified the scope of European gender equality law. The Treaty principle of equal pay for equal work is directly applicable and can be relied on in national courts. The Defrenne judgment paved the way for modern European gender equality law.

Today, the Treaty on the Functioning of the European Union which empowers the EU to adopt measures to ensure the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation.

Making use of our competence to legislate in this area, the Commission, in the seventies, legislated on gender equality in employment. We clarified the principle of equal pay and established the principle that women and men must have the same promotion and training opportunities.

In the years that followed, the EU adopted directives on gender equality in social security and on gender equality for self-employed people.

European rules on maternity leave and parental leave followed in the 1990s.

Now we are preparing the next step in this long tradition of gender equality initiatives: My proposal to present a legal instrument for gender balance on corporate boards seeks to guarantee that the legal principle of equal treatment also leads to gender equality in practice. And to gender equality at all levels.

This approach is based on the idea of positive action, awell-known principle applied in Member States that has also been part of EU law for several decades now. It is now enshrined in Article 157 of the Treaty on the Functioning of the European Union and in Article 23 of the EU Charter of Fundamental Rights. The case-law of the Court of Justice says that positive action should aim at remedying an existing situation of imbalance between men and women in a specific sector. Like any EU legislation, such action must be adequate and proportionate.

The instrument that I intend to propose is necessary to accelerate progress towards a balanced representation of women and men in the highest bodies of economic decision-making. And this is not only a matter of gender equality. There is also a solid business case for equal representation of women and men on company boards. EU legal action in this area will have significant micro- and macro-economic benefits. It will help to boost growth and jobs in Europe. A large - and ever increasing - number of studies show the link between more women in senior jobs and companies’ better financial performance. These are findings from studies by companies such as Deutsche Bank, McKinsey, Earnest and Young and Crédit Suisse.

For this reason, the proposal will be made in agreement with all the economic portfolio Commissioners: Vice-President Tajani in charge of industry and entrepreneurship, Vice-President Rehn in charge of economic affairs, Commissioner Barnier in charge of the Internal market and corporate laws and Commissioner Andor in charge of employment.

Currently, women are clearly at a disadvantage: across the EU, company boards are currently dominated by one gender: 86.5% of board members are men while women represent just 13.5%. 97.5% of the chairpersons are men and only 2.5% are women. At the same time, women account for 60 percent of new university graduates. Several European business schools have worked together to draw up a list of "board ready", highly qualified women. The project now has more than 8000 women on their list. So the talented, highly skilled women are there. But companies have to employ them, train them further, and also give them some of the top jobs.

We need both the top down and the bottom up action. Only if we integrate more women into the labour market will we improve Europe's competitiveness. Only if we hire more women will we achieve the Europe 2020 goal of raising the employment rate for adults to 75 percent. And we have to make better use of the talent pool of highly skilled women for the benefit of our economies.

Concerning the latter: as you know, in March 2011, I invited companies to sign the "Women on the Board Pledge for Europe" to voluntarily increase women's presence on corporate boards to 30 percent by 2015 and 40 per cent by 2020.

What has changed? A year later, on 5 March 2012, the Commission presented a progress report. We wanted to see whetherthere was enough commitment and signs of real change; often we gave self-regulation its chance.

And change there was: in 2011, the number of women on boards increased by 1.9 percentage points. As compared to 0,5 year before, improvement is mainly due to those Member States where quota legislation was introduced. 11 Member States (Belgium, France, Italy, the Netherlands, Spain, Portugal, Denmark, Finland, Greece, Austria and Slovenia) and EEA Member State Norway have chosen different legal solutions (including mandatory quotas) to strengthen gender equality on company boards.

I am sure that some of you have worked in your National Parliaments in France, Belgium or Italy to have binding quota legislation adopted. You know the immediate consequences of your laws: an increase in the number of women on corporate boards.

In the rest of Europe, to say it bluntly, not much has happened. In most Member States that have not taken any action, female presence on company boards has stagnated or even decreased in recent years. At this rate, it would take decades to arrive at a reasonable gender balance of at least 40 percent of both sexes. This is why we have to actnow.

The new proposal of the Commission will be another step in the EU's long tradition to promote gender equality and create a level playing field of rights and measures in the entire internal market.

When drafting my proposal, I have been guided by the principle of subsidiarity and proportionality which I know is close to your heart. It is also close to mine as a former local councillor and a former Member of the Luxembourg Parliament.

Here are six examples to illustrate this:

I propose to address only the share of female non-executive directors on boards; it should increase to 40 percent within a reasonable time-frame;

the legal instrument should only cover companies listed on the stock-exchange and SMEs should be exempt because in these economically challenging times we should not put any extra burdens on small companies;

qualification must be the decisive criterion for the selection of board members and the best candidates must be chosen;

if no equally qualified candidate from the underrepresented sex is available, the possibility of a 'flexibility clause' is foreseen;

any quota legislation should be temporary, until the objective has been achieved; and

Member States should themselves choose the sanctions for companies failing to comply with the legislation.

With these basic elements included, your fellow colleagues sitting in legal affairs or European affairs committees in your national Parliaments should not be tempted to question the Commission's initiative on subsidiarity grounds. Europe needs your support. I need you to explain in your national parliaments, to the relevant committees how and why this proposal is a very 'subsidiarity-friendly proposal'.

Subsidiarity is the general principle of EU law. A matter should be addressed by the smallest, lowest, or least centralised authority capable of addressing it efficiently. We act and legislate at EU level only if action by individual countries is insufficient to achieve the objectives.

Each time the EU legislates in the field of gender equality or in the field of company law where we can also rely on a long tradition of actions since 1969 – be it accounting standards or corporate governance rules, this principle applies. Our next proposal will do the same. It will re-enforce what exists or what is being developed at national level. It will of course be possible for national initiatives to go further and beyond what we propose at the EU level. This is a good example of how European and national legislations can mutually reinforce each other.

For the sake of the internal market, it creates a level-playing field for all publicly listed companies in the EU which have a cross-border action.

At the moment, we are having internal discussions in the Commission. As soon as the final proposal has been adopted by the College of Commissioners, I will be happy to present it to you and discuss it with you.

Conclusion

Honourable Members, ladies and gentlemen,

EU law has always played an important role in promoting gender equality. This is what legislation can do: define rights, provide for sanction possibilities and help citizens to push for their rights. Proposing a legal instrument on gender balance on corporate boards continues with this tradition. I know I can count on the continuous support of the European Parliament in this area. I will also call on the National Parliaments to help us in this process because our European economy needs to make full use of all the talent available in order to regain competitiveness.